Monetary contributions

Meal vouchers versus Monetary contributions for meals

Authors: Barbora Halousková, Andrea Kleinová
12/01/2021
Monetary contributions
The tax package for the year 2021 was approved by the Chamber of Deputies after modifications done by the Senate. As the President has not vetoed this package - although he has not signed it either - it was published in the Collection of Laws on 31 December 2020 and therefore, has entered into effect on 1 January 2021. We would like to introduce you one of the changes that this package brings.

Specifically, it is expanding the possibilities of how the employer can contribute to the meals of its employees. In addition to the options used so far, namely, to provide meals in the company canteen and via so-called meal vouchers, employers will also be able to contribute to employees' meals in cash in the form of a so-called monetary contributions for meals. It can be stated that materially, it is not a completely new legal institute, as even up until now employers could contribute to their employees' meals in the form of a cash contribution. However, such contribution - like any other remuneration for work - was subject not only to personal income tax but also to social and health insurance on the side of both the employee and the employer, and was therefore not a particularly attractive benefit, on either side.

Although the operation of a company canteen and the provision of meal vouchers bring certain tax benefits, many employers have not yet used any meal allowance for their employees, either because they do not have space for canteen or the administrative burden associated with meal vouchers is excessive.

Since the monetary contribution for meals is, by its nature, much closer to meal vouchers than to the operation of one's own company canteen which requires not only  premises, but also labour force, let's look at the tax implications it will bring in comparison with the meal vouchers. In the following section, we will discuss the advantages and disadvantages of both options in practical examples.

In the beginning, we would like to remind you about the amount of the meal allowance, from which the limits influencing the tax impacts of meal vouchers and monetary contributions for meals are derived. The maximum amount of the meal allowance, i.e. its upper limit for a business trip lasting 5 to 12 hours, set for employees in the public sphere, and thus receiving a state funded salary, is CZK 103 in 2020 and CZK 108 in 2021.

Meal vouchers

The value of meal vouchers is exempt from tax on the side of the employee, and thus also from social security and health insurance contributions, regardless of the limit.

On the other hand, for employers, it is a tax-deductible expense up to 55% of the value of the meal voucher (however, up to a maximum of 70% of the amount of the meal allowance, as stated above).

If the employer decides to contribute a higher amount to the meal vouchers, such an amount above the limit would represent tax exempt income on the side of the employee, but on the other hand, it would be a tax non-deductible expense for the employer.

If the employer contributes to the meal voucher in the amount of 55% of its value, the remaining 45% of the value is usually paid by the employee, resp. the corresponding amount is deducted from their salary. Thanks to this, the most tax-optimal value of the meal voucher in 2021 is CZK 137.

Monetary contributions for meals

The principle of tax advantage for the monetary contribution for meals is different from that applied for the meal vouchers. On the side of the employee, this is an exempt income up to 70% of the amount of the meal allowance, as stated above. Amounts exceeding this threshold must be taxed on the side of the employee and as well as subject to the social and health insurance.

On the side of the employer, it will be a tax-deductible expense in full amount, regardless of the limit.

Comparison

In the table below, you can find a comparison of the total costs on the side of the employer and the net benefit on the side of the employee, with different amounts of contributions:

Type of contribution

Meal voucher

(in CZK)

Monetary contribution for meals

(in CZK)

70% of the meal allowance (limit)

75

75

75

75

75

75

Lunch / meal voucher value

137

180

100

137

180

100

Contribution of employer

(55% value of the lunch / meal voucher)

75

99

55

75

99

55

Contribution of employee

(45% value of the lunch / meal voucher)

61

81

45

61

81

45

The tax burden on the side of employer

corporate income tax

0

4

0

0

0

0

SHI payable by the employer

0

0

0

0

8

0

The tax burden on the side of employee

personal income tax

0

0

0

0

5

0

SHI payable by the employee

0

0

0

0

3

0

Expense of employer

75

103

55

75

107

55

Net benefit for employee

75

99

55

75

92

55

 

 


As can be seen from our simplified model example, the meal allowance in the form of a meal voucher is slightly more tax-efficient than the allowance in the form of a monetary contribution for a meal. On the other hand, it should not be forgotten that the provision of meal vouchers is associated with a higher administrative burden on the side of employers as well as time and consumption possibilities limitations on the side of employees, while it is also necessary to take into account possible additional costs such as commission payments to intermedia

If you are considering which option is the most advantageous for your company, do not hesitate to contact us, we will be happy to perform a comparison based on your specific requirements and conditions and help you to set the new rules.

 

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Andrea Kleinov√°
Andrea Kleinová
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